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Tax breaks could be tied to higher pay for some aerospace workers

Labor liked the bill because it would boost wages for some workers. Small aerospace firms said it would kill their tax breaks. But the key question is whether Gov. Jay Inslee wants to tinker with the deal that created a massive $8.7 billion tax break for the state’s aerospace industry in late 2013.

Rep. Mia Gregerson, D-SeaTac, has introduceda bill that would tie an aerospace company’s eligibility for the 2013 business-and-occupation tax breaks to maintaining certain wage levels among its employees. The 2013 deal extended a 2016 expiration date on aerospace tax breaks to 2040 after Boeing threatened to move its 777x production out of Puget Sound. The tax breaks also cover more than 100 smaller aerospace firms that do massive amounts of work for Boeing.

Gregerson’s bill would require an aerospace company using the tax breaks to pay at least the median wage for a one-earner family in Washington state, as determined by the American Community Survey published by the U.S. Census Bureau. In 2013, that figure was $52,389.

At a Monday House Labor Committee hearing, union representatives testified that several thousand non-union employees plus a few union members make $15 an hour or less, which translates to $31,200 or less per year. “We’re seeing thousands of workers not sharing in the success,” said Chelsea Orvella of the Society of Professional Engineering Employees in Aerospace Local No. 2001.

Jon Holden, president of the International Association of Machinists District No. 751, testified that the tax breaks are going to already profitable companies, but low wages mean that families will have to seek state aid to make ends meet. He called that a double burden on the state’s coffers. Afterward, he said the proposed wage requirement would not affect Boeing much because most of its union workers make more than the $52,389 threshold. No Boeing representatives testified at the hearing.

However, Holden estimated that several thousand employees of the smaller firms receiving the tax incentives are earning less than the threshold set by Gregerson’s bill. And those employees are entitled to have their standard of living improve if their employers are receiving the tax breaks, he argued.

Representatives from some small Washington aerospace companies told the committee that the raises would chew into their finances enough to make taking the tax breaks unprofitable. “We would be forced to make the decision of no longer taking the tax incentives. I fear if we are forced to raise our wages to that level, we’ll no longer be able to compete,” said Gabe Doleac, representing Aviation Technical Services.

“It’s hard for a company of our size to pay the wages needed to get the incentives,” said Mike Brown, general manager of Aero-Plastics.

If Gregerson’s bill gets out of the House, it will face a Republican-controlled Senate that is not friendly to labor. And late last year, Inslee voiced reluctance to change any parameters of the 2013 tax break deal.

At an October meeting with labor leaders, Inslee said he is “concerned” about the idea of renegotiating the 777X deal to add more job protections, according to a report in The Stand, a Washington State Labor Council publication. “I would not want to do something to cause that deal to collapse” and jeopardize the 777X jobs that are now being created, The Stand quoted Inslee saying.

On Monday, Inslee spokeswoman Jaime Smith said it is premature to speculate about what legislation the governor would consider vetoing.